Keys to the new EU Digital Markets Regulation

On October 12, Regulation 2022/1925, commonly known as the Digital Markets Act (“DMA”) was published in the Official Journal of the European Union. Focusing on digital platforms, the European Commission seeks to regulate the activities of companies in the digital sector. Although it formally came into force on November 1, 2022, implementation will not begin until May 2, 2023. This post analyzes the main keys to the new Regulation. 

What is the DMA? 

Regulation 2022/1925 on contestable and fair markets in the digital sector, or the Digital Markets Act, is the new legislative instrument to regulate the activity of certain digital platforms in the EU. For this purpose, the Regulation lays down a series of rules conferring greater control powers on the European Commission to prevent anti-competitive practices.

To whom will the DMA apply?

The new Regulation begins by defining its subjective scope of application—that is, to whom it will apply. It does so through the concept of “gatekeeper”.

An undertaking will be designated as gatekeeper if it (i) has a significant impact on the internal market; (ii) provides a core platform service which serves as a gateway for business users to reach end users; and (iii) enjoys an entrenched and durable position or it is foreseeable that it will enjoy such a position in the near future.

Given the lack of specificity of the above requirements, the articles of the Regulation later specify some of these definitions.

• First, core platform service is defined as the provision of any of the following services: intermediation, social networking, video-sharing platforms, number-independent interpersonal communications, cloud computing or online advertising. Online search engines, operating systems, web browsers and virtual assistants also fall into this category. The definition of core platform service is broad, seeking to cover as many online platforms as possible.

• Second, the Regulation assumes that a company has a significant impact on the market where its turnover in the European Union is equal to or above EUR 7.5 billion in each of the last three years, or where its market capitalization in the last year has been at least EUR 75 billion, and it provides the core platform service in at least three Member States of the European Union.

• Third, platforms that serve as a “gateway for business users to reach end users” are those with at least 45 million monthly active end users and at least 10,000 yearly active business users.

• Finally, in order to meet the third requirement, platforms must exceed the above threshold in each of the last three years. 

Gatekeepers are not automatically designated. Therefore, companies owning platforms that meet the Regulation requirements must inform the European Commission, which will make the designation after hearing the company.

Also, the Regulation empowers the Commission to designate a company as a gatekeeper even if it does not comply with the notification obligation—provided that it exceeds the relevant thresholds according to a market study.

Likewise, the Commission may also designate as a gatekeeper a company that meets the requirements even if it does not exceed the established thresholds.

Main obligations and prohibitions

After defining the criteria for designating a company as a gatekeeper, the DMA sets out a series of obligations and prohibitions, the most important of which are the following: 

Positive obligations

• Allow business users to promote offers and conclude contracts with end users outside the gatekeeper’s platform.

• Allow end users to uninstall any preinstalled applications and enable them to easily change default settings provided by the gatekeeper on the virtual assistant and web browser. 

• Enable the installation of third-party apps or app stores.

• Provide business users with free real-time information about the data, including personal data, generated through the use of the gatekeeper’s platform.

• Provide users to which the platform supplies online advertising services with free daily information regarding: (i) the price paid by that advertiser; (ii) the metrics used to calculate this price; and (iii) the remuneration received by the publisher.

• The DMA also includes certain interoperability obligations for platforms that provide messaging services: they must ensure that smaller platforms can use, upon request, some of the functionalities of the gatekeeper’s platform. 

Negative obligations

• Refrain from applying the so-called “parity clauses,” through which gatekeepers oblige professionals to offer their products through their own sales channel at the same prices and conditions as on the gatekeeper’s platform.

• Not to prevent, either directly or indirectly, professional or end users from filing claims for non-compliance with the gatekeeper’s obligations before the authorities.

• Refrain from forcing professionals to use certain of the gatekeeper’s ancillary services (such as its payment system).

• Not to impose on users the obligation to register or subscribe to other platforms as a condition to use the gatekeeper’s platform. 

 DMA and merger control

 The Regulation also includes an article on merger control: regardless of whether the transaction is notifiable under the Merger Control Regulation or national law, gatekeepers must inform the European Commission, on a precautionary basis, of any concentration in which the merging entities or the resulting company provide services in the digital sector or enable the collection of data.

In principle, the Commission does not have the power to prohibit or impose commitments on concentrations notified under this procedure. However, it may share the information received with Member States' national competition authorities, so that they can request the Commission to examine the concentration in accordance with article 22 of the Merger Regulation. Therefore, even if the concentration does not meet the thresholds, the Commission may still end up examining the concentration if requested to do so by one or more national competition authorities.

Penalties

With respect to the penalty regime, the fines for non-compliance with the above positive and negative obligations are up to 10% of the total worldwide turnover of the company in the preceding financial year—and up to 20% in the event of recidivism.

The Commission may also impose fines of up to 1% of the total worldwide turnover of the company in the previous year when (i) it fails to notify that it meets the thresholds to be designated as gatekeeper; (ii) it fails to provide the information necessary for the Commission to verify the designation of the company as a gatekeeper; and (iii) the information provided in different contexts (e.g., audit, inspection, mergers) is incorrect, misleading or incomplete, among others.